Rural municipalities in Alberta are growing increasingly frustrated with a select number of oil and gas companies, that have avoided paying property taxes for at least six years. As of Jan.1, 2024, oil and gas companies owed more than $250 million in unpaid municipal property taxes. In 2023 alone, companies got away with $43 million in unpaid taxes.
These unpaid taxes withhold money that tax-strapped, small-town Alberta needs to fill potholes on a main street, keep the lights on at community centres, and help pay for all the other things that make towns work.
“Municipalities remain responsible for the collection and enforcement of their municipal taxes,” Renato Gandia, a spokesperson for the Alberta Energy Regulator (AER), said in an email to the Globe and Mail. However, oil and gas companies often make it difficult for municipalities to collect taxes from them.
The government recently passed two laws that help municipalities recover unpaid taxes from oil and gas companies. The first prohibited Alberta’s Energy Regulator from issuing new licenses to oil and gas companies that owed more than $20,000 in unpaid taxes. The second supports municipalities’ recovery of unpaid tax money from bankrupt companies.
Though these regulatory changes are a step in the right direction, the AER still allows “zombie” companies—small companies with no interest in growing their business—to continue operating while not paying their property tax bills. As long as businesses keep their debts under $20,000, they are good to go.
Government “Too Soft” on Tax Evaders
Paul McLauchlin, President of the Rural Municipalities of Alberta, says the Alberta Energy Regulator is too soft on these tax evaders.
“What the AER has allowed a small number of companies to get away with is not in the public interest,” said McLauchlin in a media release.
”It harms municipalities, it harms other property owners, and it harms the oil and gas industry. The only group benefitting are these irresponsible companies taking advantage of the AER’s hands-off approach. At the end of the day, we need a regulator, not a cheerleader.”
“While all other property owners in the province face strict penalties for non-payment of property taxes, oil and gas companies continue to exploit legislative and policy loopholes and hide behind an industry regulator that has, for many years, refused to hold some companies accountable for poor business decisions, high liability risks, and a lack of concern for the public interest,” McLauchlin said. “I’ll be blunt. Rural municipalities and all other companies and individuals paying property taxes are being used.”
Walk Away From Wells
McLaughlin believes the AER has backed itself into a corner and that any immediate enforcement of overdue tax payments would prompt many zombie owners to walk away from their wells, declare bankruptcy, and start over with a new company.
“The AER has allowed these companies to operate for such a long time, with such poor financial management, that they are now unequipped to deal with the consequences of them failing,” said McLauchlin.
The Orphan Well Association is responsible for closing, cleaning up and monitoring wells that are no longer viable or have irresponsible ownership.
According to the association’s inventory, the number of orphan wells that needed to be closed and cleaned peaked at around 3,200 in 2018-19.
The Association, funded by industry and the province, still has a lot of work to do.
There are now roughly 1,700 toxic well sites to decommission and reclaim, but another 3,800 need reclamation and approximately 3,400 require monitoring and revegetation.
